Ukraine could
theoretically default next month, as in May the country’s
parliament adopted a law allowing a moratorium on
foreign debt repayments. The law aims to protect Kiev from an
“attack by unscrupulous creditors.”

This echoed a forecast made by a Goldman Sachs analyst Andrew
Matheny on Wednesday.

“Ukraine will not make the July 24 coupon payment and, as a
result, will enter into default at that point…We do not expect
the ad hoc committee to accept Ukraine’s latest restructuring
proposal,” he said, Bloomberg reports.

Ukraine has asked its
creditors to write off 40 percent of its debt and adopt new bonds
tied to its future economic performance. Matheny says this option
could allow bondholders to make a profit in the case of positive
dynamics of economic indicators of Ukraine.

The Creditors' Committee of Ukraine, which includes T. Rowe
Price, TCW Group, BTG Pactual and Franklin Templeton, said it
insists on changing the terms of the agreement with the Ukrainian
government and the IMF to restructure the $15 billion, including
$3 billion owed to Russia. The group owns about $9 billion of
Ukrainian debt.

Ukraine's Prime Minister
Arseny Yatsenyuk also admitted Thursdayhis country is unable to pay the $40
billion debt it has accumulated over the last three years. The
total amount required to service Kiev’s debts is equal to its
military expenses, which make up five percent of GDP, he
added.

Kiev is struggling to
restructure its more than $50 billion debt, including $3 billion
bonds sold to Russia. Some estimates put the debt at $70
billion.

The IMF says the bonds
held by Russia should be treated as official rather than private
debt, reported Bloomberg Tuesday, citing
sources.If the $3
billion bonds are treated as Kiev’s official debt, they would be
excluded from restructuring.

In 2013, Russian President Vladimir Putin and then Ukrainian
president Viktor Yanukovich agreed Moscow would buy $15 billion
in Ukrainian bonds.Russia decided against buying the
extra $12 billion after the Maidan events, that resulted in
Yanukovich leaving his post and fleeing Ukraine.

Members of the committee, Jaresko and the IMF will meet in
Washington to discuss whether and when Kiev would get the next
part of a $17 billion loan.The IMF said earlier in June that it intends to give
financial aid to Kiev even if it halts servicing debt held by
private bondholders.